TripAdvisor Buys Kuxun As Part Of $50 Million China Investment Through '11

Travel-review Web site TripAdvisor said Friday it is buying Kuxun.cn, a Chinese flight and hotel search engine, as it taps into a burgeoning tourism market buoyed by China's resilient economy.

TripAdvisor, owned by Expedia Inc. (EXPE), plans to invest more than US$50 million in China through late 2011, Chief Executive Stephen Kaufer told Dow Jones Newswires. The budget includes buying Kuxun, launching its own Chinese travel-review Web site, Daodao.com, in April, and hiring more staff.

"China's economy is going to continue to grow," he said. "Tourism will naturally follow--more domestic travelers visiting domestic locations for fun."

Kaufer declined to say how much TripAdvisor paid to buy Kuxun, its first acquisition in China, home to the biggest number of Internet users around the world.

TripAdvisor will probably double the number of staff in China working on both Web sites to 160 over the next year from 80 now, Kaufer said, adding the company hasn't reviewed its plans. Over the next two years, it aims to double the combined number of visitors to Kuxun and Daodao.

According to the company, Daodao had 4 million unique visitors in September.

Kuxun lets users compare airfares and hotel-room prices from various sellers, while Daodao allows users to review and read reviews of hotels and travel destinations.

Economic growth in China has already rebounded to rates before the international financial crisis broke in September 2008, and analysts predict China's growth could even exceed 10% next year.

Tourism is expanding with the economy.

Revenue from domestic tourism rose more than 10% yearly from 2006 to 2008, and reached CNY874.9 billion last year, data from the National Tourism Administration showed. Domestic tourists totaled 1.71 billion last year, up 6.3%.

But competition is stiff.

Ctrip.com International Ltd. (CTRP) leads China's online travel market. Its Web site allows users to review hotels and to buy plane tickets or reserve hotel rooms.

Its market share is five times bigger than that of its nearest rival, eLong Inc., a unit of Expedia.

Unlike Ctrip or eLong which generate revenue when users make bookings, TripAdvisor gets revenue when clients, such as hotels, pay to advertise to users of its Web sites.

That's why Kaufer predicts that "Ctrip will probably always be bigger" in terms of revenue. "But I'd like Daodao plus Kuxun to eventually be bigger than Ctrip" in terms of user traffic, a process that is likely to take more than two years, he said.

"We're prepared to invest over the next several years, not looking at the bottom line, in order to establish and maintain a leadership position in the five-plus year time frame," he said. "If we do a good job of that, the revenue will follow in subsequent years."

-By Terence Poon, Dow Jones Newswires; 8610 6588 5848; [e-mail]